Bank of America Corp. is abandoning the controversial practice of mandatory arbitration in its consumer businesses.
"Our consumer businesses will no longer enforce mandatory arbitration in new banking disputes with individual customers," Betty Riess, a B of A spokeswoman, said Thursday.
"We do believe arbitration is a fair means of resolving consumer disputes, but we decided it was best for our customers and for the company to discontinue the practice in our core consumer businesses."
The decision will take effect later this year, as soon as the Charlotte banking company updates its agreements, she said. It will apply to credit cards, deposit accounts, and auto, marine and recreational vehicle loans. (B of A eliminated arbitration from its mortgages and home equity lines of credit "several years ago," according to Riess.)
Most issuers have long included mandatory arbitration clauses in their contracts to settle consumer complaints outside of the court system.
B of A's decision is the latest and most complete issuer renunciation of mandatory arbitration to come after two major arbitration companies backed away from handling consumer disputes.
In July, National Arbitration Forum Inc. agreed to stop handling all consumer debt cases as part of a settlement with the Minnesota attorney general's office, and the American Arbitration Association said it would no longer handle consumer debt-collection cases.
In light of those decisions, JPMorgan Chase & Co. said in July that it had stopped filing consumer credit card arbitration claims and that it was "continuing to evaluate the inclusion of an arbitration provision in its consumer contracts."
American Express Co. has also said it was "reassessing" its options for resolving consumer disputes.
On Thursday, JPMorgan Chase and Amex reiterated those statements. Spokeswomen for Discover Financial Services, which historically offers its cardholders "the opportunity to opt-out of arbitration and still use their card," and Capital One Financial Corp., which "currently [has] an arbitration clause" in its consumer contracts, reported no change in their policies. A Citigroup Inc. spokesman said by email that it "is continuing to monitor events relating to the use of arbitration of consumer disputes."
Mandatory arbitration clauses came under scrutiny even before the arbitration firms pulled back.
Last year, the San Francisco city attorney filed a lawsuit against National Arbitration Forum and B of A.
Riess would not discuss the lawsuit Thursday or whether it was related to B of A's decision to discontinue the practice.